MERGERS, ALLIANCES & CONSOLIDATIONS,AN AIRPORT PERSPECTIVE

Ian WadsworthChief Commercial

OfficerOfficer

Houston AirportsAirports

U.S. Airline Consolidation

AmericanTWA

American

US AirwaysAmerica West

US Airways

DeltaNorthwest

Delta

United Continental

United

SouthwestAirtran

Southwest

Airline Alliances

Challenges for Airports

Airline Merger Motivations Airport Motivations

Expand network breadth

Increase market power

Grow air service options

Create competition to lowerIncrease market power

Eliminate redundancies

Leverage scale economies

Create competition to lower airfares and grow the market

Diversify airline customer Leverage scale economies base

Support long‐term investment in infrastructureinvestment in infrastructure

Houston – A Case Study

“New” United ‐ The World’s Largest Airline

$32

CY 2009 Total Operating Revenues

$28.9$28.1

$28

$30

$32

olla

rs

$24

$26

$28

ions

of D

o

$20

$22

$

Bill

i

Continental + United Delta + Northwest

Source: Airline Press Releases

The Promise of the Combined Carriers …

Two of the most complementary networks of any U.S. carriers, with minimal domestic and no international route overlaps

A global network accessible from multiple well‐placed hubs

Continued service to all of the communities served by each ycarrier

The most modern, fuel‐efficient fleet and the best new aircraft order book among major U S net ork carriersaircraft order book among major U.S. network carriers

Vast opportunities for frequent flyer customers to earn and redeem miles, including on Star Alliance partnersredeem miles, including on Star Alliance partners

Improved long‐term career opportunities and enhanced job stability for employees 

“New” United After Merger

Source: April 2010 OAG

In Houston … Combination of IAH’s 1st & 5th Largest Airlines

IAH Carrier Market Share IAH + HOU Carrier Market ShareBy Total Domestic Onboard Passengers – YE 3Q 2009

USUA

1.8%

FL 0.8% B6

0.3%

By Total Domestic Onboard Passengers – YE 3Q 2009

UA2.3%

F90.7%

DL+NW

AA2.6%

2.1%

US2.7%

AA2.6%

CO67 8%WN

DL NW3.6%DL+NW

3.8%

67.8%WN 20.4%CO

87.9%

Source: U.S. DOT T-100 Database

Only 14 Overlapping Routes … 

Most Are Hub To Hub And All Are DomesticMost Are Hub‐To‐Hub And All Are Domestic

Source: April 2010 OAG

Nonstop International Service At The IAH Hub

Moscow (DME)Amsterdam

ParisFrankfurtLondon Heathrow

VancouverAnchorage Edmonton

Calgary MontrealToronto

Quito SingaporeBogotaCaracas

DohaDubaiHonolulu

Tokyo Narita

Lagos

Buenos Aires

Singaporeg

Sao PauloRio de Janeiro

LuandaLima

Auckland

Source: June 2010 OAG with newly announced routes included (AKL and LOS to start in Fall 2011)

IAH Will Have 29% Of All International Services

Based On June 2010 Nonstop Schedules

Mexico/Central

Nonstop International Destinations ServedBy Hub And By Region

Hub Transatlantic Transpacific South America Mexico/Central America/Caribbean Canada All Regions

Newark (EWR) 28 4 3 22 8 65Houston Bush (IAH) 5 2 7 46 4 64

Chicago O'Hare (ORD) 7 4 1 6 12 30Washington Dulles (IAD) 13 2 2 4 5 26Washington Dulles (IAD) 13 2 2 4 5 26

San Francisco (SFO) 2 7 0 4 5 18Denver (DEN) 1 0 0 3 8 12

Los Angeles (LAX) 1 2 0 4 1 8Cleveland (CLE) 0 0 0 2 3 5

Total 57 21 13 91 46 228

Source: June 2010 OAG, Services include only the hub carrier services, no code share operations, Includes 2011 starts of Auckland and Lagos

Changes in Flow Traffic Favorable to Houston

Pre‐Merger Post‐Merger

United sells Los Angeles – Sao Paulo over Washington or Chicago

United sells that passenger over Houston

United sells Washington National – Oklahoma City over Chicago

United sells that passenger over HoustonCity over Chicago

United sells Detroit – Mexico City over Washington Dulles

United sells that passenger over Houston

United sells Orlando – Tokyo Narita over  United now can sell that passenger over HoustonWashington Dulles and Chicago

Continental sells Pittsburgh – Sacramento over Houston

United sells that passenger over Denver or Chicago

Continental sells Nashville – Vancouver over Houston

United sells that passenger over Denver

New United Becomes the Largest U.S. Transpacific Airline

West coast hubs better suited than Houston for expansionWest coast hubs better suited than Houston for expansion to Asia

Source: April 2010 OAG

New United Becomes the 2nd Largest U.S. Transatlantic Airline

East coast hubs better suited than Houston for expansionEast coast hubs better suited than Houston for expansion to Europe

Source: June 2010 OAG

New United Becomes The 2nd Largest Airline In The Americas

IAH is ideally situated as United’s primary gateway to Latin America

Source: April 2010 OAG

Houston’s International Passenger Mix

Latin America is 65% of all international traffic

53 %

Mex

ico

–

53 %

Mex

ico

–

i i b k

United Market Concentration

Houston Air Carriers, Departure Seats by Market

Air Canada E i ll k t

Houston Air Carriers, Departure Seats by Market

United67%

Canada33%

Canada

Europe is a smaller market than Latin America, but has 

6 competing carriers 

United40%

KLM12%

Lufthansa12%

Singapore8%

Europe

Middle East

40%

Air France9%

British19%

12%

UnitedSouthwest

Other11%

USA

Emirates64%

Qatar36%

United95%

VivaAerobus1%

Latin AmericaUnited64%

25%

Aeromexico3%

TACA1%

Merger with Southwest and AirTran

Southwest has proposed international service from H bb i tHobby airport

United’s $1 Billion Terminal B Redevelopment

United to fund terminal/concourses with $700 MM of SFRBs

Houston Airports to f d d i fi ldfund ramp and airfield infrastructure with $300 MM of PFCs 

Strategies for Airport Sustainability

At the local level, Airports can:Focus air service development efforts on foreign flag carriers

W k t tt t “N E t t” i h S th t J tWork to attract “New Entrant” carriers, such as: Southwest, Jet Blue, Spirit, and Virgin America in the U.S., and RyanAir, Volaris, Air Asia, and others, elsewhere

Share investment risk with airlinesShare investment risk with airlines

At the national and international levels, we need to:Strengthen government competition policies/oversight to ensure open and fair access to airport facilities

Continue progress towards liberalized international air service agreements

Thank youThank you